Asahi on luxury hotel price wars

June 11, 2009
By Ken Worsley

This article from yesterday’s Asahi comes straight out of the Told You So Department: Ritzy hotels caught up in cutthroat competition.

The Asahi article opens with this:

Luxury hotels are slashing rates amid the economic slump and appreciation of the yen, a strategy that could fill vacant rooms in the short term, but could have devastating longer-term effects.

Many of these hotels opened recently in hopes of attracting an influx of foreign travelers. But when demand failed to reach expectations, the hotels started cutting prices. Now, some hotels are offering rooms at half the normal rates.

Such a situation is bad for brand image. BizCast Japan has pointed out a few times that overcapacity in Tokyo’s luxury hotel market was bound to have negative consequences. Back in February 2008 some time was devoted to wondering what the motivations behind building such hotels could be when Japan fails to draw as many tourists as Singapore, and that Japanese government attempts to draw in more tourists have seen tepid results at best. Even earlier, in May 2007, curency exchange risks and other factors were discussed in a segment looking at Japan’s attempt to draw more tourists. At that time, a plan to build a foreign financial district was being discussed (and the Yomiuri said it was real). A little over two years on, and nothing more has been heard about that.

The fact that the media is already reporting price cuts and damage to brand images is worrying. The big question now is whether downward pressure on hotel bookings will continue long enough to see a major player exit the market. Most of them have deep pockets, and deeper pride, so even a single exit from the Japanese luxury hotel market would represent a huge blow to the industry’s image.

What can the average consumer take from this? Knowledge that the full rates were way overpriced to begin with.

Filed Under Business, Tourism